ECON - CHAPTER 11
when disposable income increases from 6 trillion to 6.5 trillion, consumption expenditure increase from 5.5 trillion to 5.9 trillion. The MPC equals
0.8
the slope of the consumption function is
less than 1
in the keynesian model of aggregate expenditure, real GDP is determined by the
level of aggregate demand
at equilibrium expenditure
aggregate planned expenditure equals real GDP
the Keynesian model of aggregate expenditure assumes that
both individual firms' prices are the price level are fixed
the marginal propensity to save equals the
change in savings resulting from a one dollar change in disposable income
disposable income is divided into
consumption and saving
the aggregate expenditure curve shows
how planned aggregate expenditure and real GDP are related
in the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are
planned consumption expenditure and planned imports
the slope of the aggregate expenditure curve equals the change in
planned expenditure divided by the change in real GDP
in the very short term, in the Keynesian model, which of the following is fixed and does not change when GDP changes
planned investment
a consumption function shows a
positive (direct) relationship between consumption expenditure and disposable income
when disposable income is 0, consumption is $2000. Then
saving = -$2000
equilibrium expenditure occurs when
the aggregate expenditure curve crosses the 45-degree line
What is the marginal propensity to consume
the change in the consumption expenditure divided by the change in disposable income
1 - MPC equals
the marginal propensity to save
the sum of the components of aggregate expenditure that vary with real GDP is called
induced expenditures
which of the following is true
MPS + MPC = 1
when disposable income increases form 7 trillion to 7.5 trillion, consumption expenditure increase from 6.5 trillion to 6.9 trillion. The MPS is equal to
0.2
if the marginal propensity to save is 0.6, then the marginal propensity to consume is
0.4
the expenditure multiplier equals
1/(1 - slope of AE curve)
if the MPC is .9 and there are no income taxes or imports, the multiplier for a change in autonomous expenditure equals
10
if there are no taxes or imports and MPC = 0.67, the multiplier is
3
the MPC is equal to
C / YD
autonomous consumption is that portion of consumption expenditure that is not influenced by
income
disposable income is
income minus taxes plus transfer payments
if the slope of the AE curve increases, the multiplier
increases